Labor has hit back at John Howard after he and Finance Minister Nick Minchin blamed the states for pushing up interest rates.
Ahead of an expected interest rate rise this week, federal Finance Minister Nick Minchin today said the Labor states were putting upward pressure on rates by accruing too much debt.
The Reserve Bank of Australia (RBA) is widely tipped to raise interest rates by one quarter of one per cent on Wednesday.
Senator Minchin said the Federal Government was minimising upward pressure on inflation and mortgage interest rates.
"Our fiscal policy settings are such that we are minimising the pressure on inflation and mortgage interest rates while we observe that the state Labor governments all going into deficit, racking up debts,'' he told the Ten Network.
"They're going to rack up $80 billion in debt over the next four years, so we are concerned about the extent to which state Labor governments are putting upward pressure on interest rates.''
Later, the Liberal Party launched an ad on internet video website YouTube called Labor can't manage money, attacking the states' escalating debt.
"Never forget, it is governments who borrow money and get into debt who put upward pressure in interest rates,'' the ad says.
Senator Minchin indicated he did not think the expected interest rate rise later this week was warranted, pointing out underlying inflation was running at 2.6 per cent.
"From our point of view, their job is to keep inflation between two to three per cent and that's where inflation is,'' he said.
However, National Australia Bank chief executive John Stewart today said he thought there was a 50/50 chance the RBA would lift rates this week.
Opposition Leader Kevin Rudd said Prime Minister John Howard and the Federal Government were trying to pass the buck.
"Mr Howard seems to now be saying that if there's a problem with interest rates in Australia, it's because of the states, it's because of anybody else apart from Mr Howard,'' he said.
"I find that a very interesting exercise in the blame game.''
West Australian Premier Alan Carpenter also accused the Federal Government of trying to shift blame ahead of the federal election.
"John Howard and Nick Minchin are asserting states are running deficits and that's affecting interest rates,'' Mr Carpenter said.
"It doesn't work that way.
"John Howard told people he'd keep interest rates down and he hasn't.
"So he's looking for people to blame - he's to blame.''
Senator Minchin today also responded to calls from the Real Estate Institute of Australia to double the first home buyers grant to $14,000 to give people a better chance of entering the market.
He said such a move would drive up housing prices unless state governments released more land for housing.
"I do caution against those advocating doubling it because that will end up just feeding into prices and no one will be better off,'' Senator Minchin said.
"The trouble with that is that it adds to demand.
"You would not want to double the first home owners grant unless you were sure there was going to be a supply response at the state level.''
Source: AAP
